Economic Growth and Technological Progress in Turkey: An Analysis of Schumpeterian Mechanisms

This paper studies a second-generation Schumpeterian model to understand the nature of technological progress and economic growth in Turkey. It identifies some structural parameters numerically and tests whether certain Schumpeterian mechanisms work. Results show that, while horizontal (product) innovation works as determined in theory, vertical (process) innovation does not operate in the long run. Since the paper directly estimates the structural forms originating from the general equilibrium of the model economy, results do not carry any endogeneity bias. The paper also explains, in a quite transparent way, why the Turkish economy did not converge to frontier economies. The most appropriate policy under resource constraints is to strengthen the incumbent firms and support their growth, and the formation of new enterprises is not a policy priority